A “hard money loan” is a loan in which the loan decision is primarily based on the value of the property (the “hard asset”). This is in contrast to criteria such as income history, and credit history. Hard money rates often are higher than long-term rates. However often banks are not fast enough or have reasons preventing a loan. Banks may require high credit scores, high taxable income, and lots of verification, etc. Alternatively, hard money lenders often have very few criteria. Hard money lenders often can underwrite and fund a loan in a matter of days rather than weeks or months. The term “hard money loan” may mean different things to others. Property value is the primary concern for Good Funds Lending, LLC. Good Funds Lending, LLC is not concerned about credit scores or income but considers other aspects of borrowers.
There are several reasons why a business might want a bridge loan while waiting for a bank loan. Sometimes a transaction needs to happen quickly or the business owner needs liquidity quickly, but the bank needs more time to process the loan. Sometimes a bank can’t provide the loan until more time has passed after a credit or income hiccup.
Sometimes income or rental property needs to be quickly refinanced after or during a divorce. An ex-husband or ex-wife may no longer willing to be a borrower or guarantor. Sometimes a divorce damages one or more of the ex-spouses’ credit. The ex-husband or ex-wife may not have sufficient income to get a bank loan without the ex-spouse. However, a divorce decree may require the ex-spouse to no longer be a borrower or guarantor on the promissory note. Often with time a spouse may repair his or her credit, sell the property, or provide sufficient income to get longer term loan. Good Funds Lending, LLC provides loans secured by investment properties only (not properties intended for personal, family or household use). Good Funds Lending, LLC does not provide loans for personal residences (rental and investment properties only).
We can work with borrowers to utilize a “soft pull” credit history service such as CreditKarma.com.
We may as it is important to us to know if borrowers are in trouble. We may not look at credit history for every loan with repeat borrowers (We do not pull credit reports for pre-approval applications). We are a hard money lender, so our loan decisions are primarily based on the underlying value of the property (“hard asset”); However, even as hard money lenders, we do consider recent credit related behavior among other factors.
As a Colorado hard money lender, we will only make loans as the first and only lien holder on a property. In our loan agreements, you will agree not to further encumber the property (e.g. no 2nd mortgage, other liens etc.). You should plan to have cash available for 3rd party closing costs (title insurance, closing fees), holding costs (insurance, taxes, utilities), property maintenance and cleaning expenses, staging expenses, cost overruns, other expected or unexpected expenses and rehab labor and material expenses (until you receive rehab draws, if you have a rehab draw account). If you borrow money for any of these purposes, it may not be secured/collateralized with the property or items attached to the property.
We closely look at the borrowers’ exit strategies. We do look at the borrowers ability to pay their expenses. Some of our hard money loans have payments of $0 until payoff (unless there is a default); Obviously, in such cases, $0 loan payments do not concern us, but we are concerned with your ability to successfully complete the project and have funds available for related expenses. If we do not think you can pay your expenses which may include utilities, insurance, monthly loan payments (if any), taxes, repairs (or some repairs before drawing rehab funds, if there is a rehab account), monthly loan payments (if any are called for), etc., and pay off your loan via the planned exit strategy we will not make the loan.
In general no, we will only loan as the first and only lien holder. As the loan is a hard money loan we want the hard asset (i.e. the property) to be unencumbered by other loans, whether subordinate or superior to our loan. In some cases we require a first lien on the project property and may be secured by junior liens on other properties.
The extension automatically occurs after the initial term (typically 180 day period) unless you have paid off the loan or there has been a default. On the first day of the extension period (typically day 181), your extension payment of 0.3% of the outstanding principal amount (includes any accrued interest that has been added to the initial principal) is due. (extensions only available for the Fix & Flip and Fix & Hold loans).
Why are your rates lower than the typical 3 to 4 points (i.e. 3-4% origination) and 14-15% interest?
We work hard to keep our costs down so we can provide very competitive rates. We also try to minimize unnecessary costs for our borrowers (e.g. single family properties do not require an appraisal).
- We use one source for funds, so we are the final decision makers and do not need to consult with or comply with anyone else in making our lending decisions, restrictions and rules. We don’t have to compete for additional money sources that may require higher rates.
- We work to keep our overhead low.
- We underwrite in-house and don’t need to spend resources communicating back and forth with other parties.
- For rehab/ fix and flip loans we look at borrowers’ experience and qualifications to lower risks and costs to all parties.
If you (your family or your employees) are living in the property (single family residence or a 2-4 unit residential property) or the loan is for personal, family or household use, the loan is classified differently by federal and state law and we would not be allowed to offer these loans or would have additional process and administrative requirements. Therefore the restriction that you, your family and employees may not occupy, reside in, or live at the property is strict and is expressly prohibited in our loan agreements. Additionally we like lending for investment purposes only and do not want to be put in the position of ever having to potentially foreclose on someone’s home.
We can work with borrowers to utilize a “soft pull” credit history service such as CreditKarma.com (and avoid hard credit checks).
It is important to us to know if potential borrowers are in currently in financial trouble. We are a hard money lender, so our loan decisions are primarily based on the underlying value of the property (“hard asset”); However, even as hard money lenders, we do consider recent credit related behavior among other factors. We will typically review credit history for each human borrower. We are not looking for a minimum credit score, but will evaluate recent credit history focusing primarily on the following aspects:
- Related recent bankruptcies
- Related recent foreclosure proceedings
- Recent history of late payments
- Currently owed payments that are past due
We look at the each loan as a whole package including the asset, the borrowers and the market.
(Good Funds Lending, LLC provides hard money loans in the Colorado Denver Metro area)
For the pre-approval application, we will perform a cursory evaluation of your financial estimates for the project (purchase/acquisition cost, rehab budget, after repair value), and your level of experience and your answers to few other questions. If we believe there is a reasonable likelihood that we would make a loan based on the information provided, we will inform you that you are pre-approved. If approved, and you request a pre-approval letter (Often pre-approval letters are submitted with offers on properties; however, some borrowers may choose to complete a pre-approval application after the property is under contract). A pre-approval is not a guarantee that the loan will be approved or made.
For the full application you provide more details regarding the project and your experience. We more carefully review the borrowers and project. We evaluate the current and after repair value of the property and closely review the expected repair/rehab costs. We examine credit history (via a “soft pull” working with the potential borrowers using a service like CreditKarma.com or a “hard credit check”) of all human borrowers. We do not look for a minimum credit score, but primarily focus on your credit activities/events in the last two years. Prior to making a decision on a loan commitment we typically do a property walk through with one of the borrowers.
At some point prior to a loan commitment we need to meet all human borrowers on the loan and take a picture of each driver license (or State ID) and do a property walk through.
Hard Money is not always the correct solution. Before using hard money, you should explore other financing options available. We are building a Colorado hard money business focused repeat business where our borrowers use our hard money lending services only when appropriate and as one part of their financing strategy. We are a private lender seeking:
- To provide loan beneficial to the community, the borrowers, and Good Funds Lending, LLC
- Long-term relationships with ethical people
- Borrowers strategically using hard money, often because banks and credit unions are too slow or unreasonalbe to capitalize on an opportunity.
Hard money is not always the best solution. You should consider other options before using hard money.
Our Colorado hard money business is aimed at helping smart and ethical borrowers, where our borrowers use our hard money loans only when appropriate and as a part of their financing strategy.
Answers to frequently asked questions regarding Good Funds Lending, LLC and Colorado hard money loans are available on our Frequently Asked Questions Page.
Colorado hard money loans for single family, multi-unit residential (2-40 units), operating/occupied commercial , and operating/occupied industrial properties in the Denver Metro Area (residential properties must be non-owner occupied).
Colorado is a wonderful place to live and do business. We are happy to be a part of the Denver business community.